1. Field of the Invention
The present invention relates generally to point of sale systems and more particularly to a demand deposit account data processing system whereby demand deposit account data may be recorded and processed in order to verify and settle transactions electronically.
2. Description of the Prior Art
The technology and hardware to accomplish electronic transfers of funds have been known in the art for some time. For instance, merchants presently have at their disposal devices such as checkreaders, terminals for magnetic cards such as credit cards and automated teller machine (ATM) debit cards, manual input of account information, or some combination thereof in order to obtain authorization for and settlement of transactions at the point of sale.
A typical prior art electronic funds transfer system 10 is shown in FIGS. 1a and 1b. The prior art system 10 comprises a point of sale terminal 22 that includes a printer, a display monitor, and a magnetic card and/or a checkreader. The point of sale terminal 22 also has associated therewith a microfilm camera 23 that photographs a completed check 20 presented by a purchaser. When a roll of microfilm is complete, the merchant delivers 24 the film cassette to the merchant's financial institution. The point of sale terminal 22 is connected to a central processing/communication system 25 by a direct line or by dial-up communications, and this central system 25 is adapted to review information received from the point of sale terminal 22 in order to determine whether a transaction should be authorized or denied 28 and to record and log 40 all information relating to the transaction for later retrieval and analysis.
In practice, a check 20 or bank card 21 is presented by a customer to a merchant and swiped through the checkreader or magnetic card reader, respectively. The checkreader portion of the point of sale terminal 22 reads by either magnetic ink character recognition (MICR) or optical character recognition (OCR) the American Banking Association (ABA) account indications printed on the face of the check 20 and converts this information to digital signals. The customer is prompted to key in the personal identification number (PIN) associated with his or her account, and the merchant then enters the sale data that indicates the amount of the transaction to be authorized. All this information is converted to digital signals and communicated to the central system 25 to begin the authorization process 28.
These digital signals, referred to hereinafter as "the transaction," enter the authorization process 28 and the central system 25 verifies the transaction by authorization algorithms, an ABA account number-PIN pair database 29, and a funds verification check 30. The ABA account number-PIN pair database 29 maintains a file of ABA account numbers and the PINs assigned to those numbers. The funds verification check 30 is a software program adapted to communicate with a paying financial institution 50A in order to determine that sufficient funds exist to cover the transaction.
The central system 25 then logs the MICR information 40, creates a transaction identification number 40, and, if the PIN is found to match 29 the account number and sufficient funds are determined to exist 30, an approval number is assigned 40. The central system 25 then creates 41 the electronic debit and credit files for submission to an automated clearing house (ACH) or federal reserve network computer. These electronic files 41 instruct the customer's bank, the paying financial institution 50A, to deposit the necessary funds in the merchant's bank, the depositing financial institution 50B. The ACH or federal reserve computers execute 42 these debit and credit file instructions., and the paying financial institution 50A deposits the customer's funds into the depositing financial institution 50B. Upon receipt by the point of sale terminal 22 of an approval message for a transaction, the merchant may issue an instruction to void 26 the transaction or to reverse 27 the previous transaction instruction, whether that previous instruction was to credit the merchant's account or to credit the customer's account.
All transaction information relating to approved transactions is recorded in the central system's data warehouse 51 for the merchant's future reference. These prior art systems 10 generally update their information on a daily basis in a batch process, and daily reports 52 may be generated to provide both detailed and summary records of transaction information.
While these prior art electronic funds transfer systems 10 represent a great advance over traditional check handling procedures that require transfer of a paper check among numerous financial institutions, they nonetheless suffer from a number of disadvantages. For example, these prior art systems 10 do not include or contemplate any mechanism for dealing with exception conditions such as an invalid PIN number or a denial due to insufficient funds. If exception conditions arise, prior art systems 10 simply decline to authorize the transaction and customers are left to find another form of payment or to abandon the transaction. As well, if the point of sale terminal 22 is not operating properly or not operating at all, merchants have no option but to submit the customer's check 20 into the traditional paper check processing stream for deposit at the merchant's financial institution 50B, thereby submitting themselves to the risks associated with this old payment method.
Most old systems rely upon the automated clearing house network to accomplish the actual crediting and debiting of funds. Regarding recording customer information to deal with exception conditions, the best method that prior art systems offer is a microfiche recording of the transaction. There is no means by which to accomplish real time posting of the point of sale debit transaction, nor do the old processing systems incorporate any method by which a transaction can be guaranteed in the absence of a successful communication with the customer's financial institution. A further significant disadvantage of these prior art systems concerns the inability of these systems to recognize and deal with exception conditions in real time so that a merchant can obtain all necessary information from the customer before the customer leaves the point of sale.
Examples of relevant prior art devices include U.S. Pat. No. 4,321,762 issued Mar. 23, 1982; U.S. Pat. No. 5,237,159 issued Aug. 17, 1993; U.S. Pat. No. 5,412,190 issued May 2, 1995; U.S. Pat. No. 5,484,988 issued Jan. 16, 1996; and U.S. Pat. No. 5,532,464 issued Jul. 2, 1996; and reference patents listed therein. However, this prior art leaves significant room for improvement, both in terms of the ability to settle transactions on line and in terms of the ability to deal with exception conditions. The present invention is addressed to such improvement.